Mumbai: A prolonged slowdown and the implementation of the new real estate law are forcing several mid to small size residential developers to seek partnerships with larger developers to help revive their projects stalled by funds shortage and regulatory hurdles.
Many local builders in Maharashtra, where the new Real Estate (Regulations and Development) Act (RERA) has been notified and a regulatory body has been formed, have approached large developers with deep pockets to take over their stalled projects. Some others are seeking partnerships for new projects which have not taken off.
In April, Bengaluru-based Ozone Group revived Vijay Raheja Group's “The Gateway" luxury project at Andheri. The project with a development potential of 120,000 sq. ft, was stuck half way through due to financial reasons. Ozone invested in the project and is currently marketing it, said a person close to the development.
Aditya Birla Real Estate Fund, an investor in the project, confirmed that ‘The Gateway’ is currently being co-branded by Vijay Raheja and Ozone Group. A spokesperson for Ozone Group declined to comment.
Ozone Group, which is planning to ramp up its business in Mumbai, is evaluating seven to eight such projects by local builders. “After RERA comes in, there will be a lot of opportunity at the project level. Either the builder does not have the wherewithal to sell and construct, or sometimes, the projects are stuck for want of funds," said the person mentioned above on condition of anonymity.
Mumbai-based Terraform Realty Ltd is actively looking to partner with large developers to monetize some of its land assets or jointly construct five of its ongoing projects which are at various stages of development.
“We are looking to join hands with larger groups with better execution capability. While we have the wherewithal for holding land and taking care of the land asset per se, the development will be done by someone else," said Sandeep Santholia, vice-president, Terraform Realty. The company has signed memoranda of understanding with other bigger developers to start two of its projects, he said, but did not disclose names of the builders.
Large builders like Godrej Properties Ltd, Oberoi Realty Ltd and Hiranandani Communities said many local builders are looking to sell their entire project or seeking partnerships for new ones.
“There has certainly been higher levels of engagement with local players as compared to last year and we expect to see this phenomenon further accelerate in the near future aided by consolidation and exits happening in the market," said Mohit Malhotra, managing director and chief executive officer (CEO) , Godrej Properties Ltd.
Earlier this year, the company entered into a development management agreement with Shivam Realty to develop a housing project at Kandivali East in Mumbai.
"We are engaging with developers across the spectrum to either partner or purchase their land parcels," he said.
Hiranandani Communities is also looking at the joint development model for the first time given that there are rising opportunities for distressed sale in the market.